Published: Dec 1, 2010 00:46 Updated: Dec 1, 2010 00:46
NEW YORK: Oil slipped on Tuesday as the dollar hit an 2-1/2 month high against the euro on concerns that Europe's debt crisis may widen and on worries over demand in China as the No. 2 consumer seeks to brake energy demand growth and cool inflation.
US heating oil and gasoline futures fell back as front-month December products contracts were set to expire on Tuesday, weighing on crude. On Monday, cold weather boosted distillates and tight New York Harbor supplies lifted gasoline, helping crude prices rise.
US crude oil for January delivery fell 62 cents to $85.11 a barrel at 12:50 p.m. EST (1750 GMT), having earlier slipped as low as $84.63. Even a close at that intraday low would leave oil up nearly 4 percent for the month.
Total US crude trading volume was about 305,000 lots after midday in New York, 51 percent below the 30-day average.
In London, ICE January Brent crude fell 53 cents to $86.81 a barrel.
Gold, seen as a safe haven investment in troubled times, jumped to $1,383.50 an ounce from $1,357 on Monday.
The dollar index against a basket of currencies reached a more than two-month peak as the euro tumbled on continuing fears that Ireland's bailout might not help keep Europe's debt problems contained.
Converting prices to euros, Brent reached its highest level for almost seven months on Tuesday, climbing above 67 euros per barrel.
Robert Montefusco at Sucden Financial in London said the weakness of the euro was putting increased pressure on oil.
"That puts pressure on the fundamentals," Montefusco said. "Fear of contagion with not only Portugal and Spain, but now with France and Belgium in focus as well."
Oil and dollar-denominated commodities often move inversely to the dollar. A stronger dollar typically pressures oil prices as it boosts the value of greenbacks paid to producers while making it more expensive for consumers with other currencies.
China's key Shanghai stock index closed at a seven-week low, with a shortfall of cash in the domestic money market creating a liquidity squeeze.
The FTSEurofirst 300 index of top European shares closed 0.03 percent higher at 1,069.52 points, but the index suffered a 1.6 percent loss for November, its first monthly loss since August.
The Dow Jones Industrial Average was down 32.77 points, or 0.30 percent, at 11,019.72. The Standard & Poor's 500 Index fell 5.51 points, or 0.46 percent, at 1,182.25, while the Nasdaq Composite Index dropped 25.19 points, or 1.00 percent, at 2,500.03.
MSCI's all country world index was down 0.43 percent.
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